Certified Financial Planners

A Certified Financial Planner (CFP) is a financial adviser who has met the rigorous educational, experience, and examination requirements to earn the CFP designation from the Certified Financial Planner Board of Standards in the US, or the Financial Planner Standards Council in Canada. Although there are many experienced, qualified financial advisers who do not have the CFP, in general, advisers who earn the CFP have demonstrated a commitment to extra training and continuing education in the field.

To meet education requirements, advisers must have at minimum a bachelor’s degree from an accredited university, and must master over 100 topics through coursework governed by the CFP Board. Topics include Estate Planning, Retirement Planning, Investment and Securities Planning, and many others.

After successfully passing examinations on each topic, to earn the CFP, a candidate must demonstrate extensive experience in at least one of six areas of financial planning and have at least three years of experience as a financial adviser. CFPs also have additional continuing education requirements above those required of all licensed financial advisers and must recertify every two years.

What Services Can a CFP Provide?

CFPs provide a wide range of financial planning and investment advising services. In that sense, they are not markedly different from other financial advisers in the field. The main difference is that CFPs have undergone extensive training in financial planning (in addition to investment advising) and are committed to a client-centered business model.

The services offered by an individual CFP depends on a number of factors including licenses, credentials, experience, and areas of expertise. In general, financial planners can only offer insurance or securities products for which they have the proper license and can only give investment advice in the state in which they have been registered.

Some planners offer only advice on a range of financial topics, some offer both planning advice and sell securities, and some may focus only on selling investment products. Many CFPs choose to focus on a particular area of expertise in the financial planning field such as estate planning, retirement planning, small business planning, or financial services targeted towards high-net-worth investors.

Benefits of Using a CFP

Choosing a financial adviser can be a fraught process and requires time, skepticism, and eventually, trust. While the CFP designation is no guarantee of quality or fit, CFPs have demonstrated a desire to further their education in the field of financial planning.

CFPs are bound by a strict code of ethics that, among other things, requires them to give impartial advice, put clients’ needs first, and disclose any conflicts of interest. CFPs are also required to adhere to a more stringent list of fiduciary practice standards than other financial advisers. This puts CFPs ahead of other financial advisers in terms of ethical and professional requirements. CFPs also have much more stringent training and educational requirements than other financial planners and financial advisers. This means that CFPs are required to re-train more often and are generally more up-to-date with new trends in financial planning. In the event that you suspect a CFP has acted unprofessionally or is in violation of regulations, you can report him or her to the CFP Board.

The CFP (much like the Chartered Public Accountant or Chartered Financial Analyst designations) has become a de facto standard of excellence in the financial planning field. More and more investment companies are encouraging (and sometimes requiring) advisers to get the CFP as a demonstration of commitment to clients. While many advisers who do not have their CFP can be excellent financial planners, it might be wise to ask a potential adviser what reasons he or she has for not pursuing the CFP.

Some advisers may not have a bachelor’s degree and thus not meet the basic education requirements for the CFP program. Others may have been in the business for so long (and already have a large book of clients) that taking the time required for the CFP does not make sense.

Who Can Claim CFP Certification?

There are many different labels that financial advisers adopt: investment advisers, financial planners, stock brokers, registered representatives, para-planners, etc. However, the only advisers allowed to use the Certified Financial Planner designation are those who have completed the certification process. These advisers will add CFP after their names on business cards and official stationary. If you have any doubts about a financial planner, you can search for them in the US CFP database.

How are CFPs Paid?

CFPs are not the same as fee-only planners, meaning that they can be paid in a variety of ways. Finding out how a CFP or other financial adviser is paid is a key step to understanding the source of their advice. While many advisers who are paid through commissions are good advisers who can give good planning advise, some are just good salespeople who are motivated only by the size of their monthly payout.

In general there are several broad categories of payment structures: fee-only planners who charge hourly rates or flat account fees; fee-based planners who are paid through a combination of commissions, load fees, and account fees; and commission-only brokers who are paid per trade. While each adviser is different and has different reasons for choosing the payment structure he or she uses, make sure that you know exactly how your CFP or financial adviser is being paid.

Don't Put It Off, Jumpstart Your Retirement Plan Today

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Disclaimer: This is not investment advice. All information on this site is intended for educational purposes only. We are not liable for any potential damages that may be incurred from this information. Always consult a licensed financial professional before investing.